Thursday, August 25, 2005

Search Engine Marketing



Search engines have become a boon for tech marketing professionals. For several firms which sell obscure, esoteric, complex technology products - Search engine is their best bet to reach all their potential customers. The concept of search engine marketing emerged in 1999 or so, in 2000 it accounted for less than 1 percent of online advertising spend, Search Engine Marketing (SEM) has clearly emerged as one of the most powerful and effective marketing strategies available.

Today, roughly one of every two online purchases is preceded by an online search. Spending in online search advertising has increased a blistering 282 percent per year, surpassing $3.8 billion in 2004 (Source-Internet Advertising Bureau reports, 2000–2004). That is faster than any online advertising medium to date. And the future is expected to be just as hot, with multiple research firms calling for SEM expenditures to reach anywhere from $6–8 billion over the next
several years.

This is not a surprise given the potential for SEM to drive substantial profit with minimal investment—irrespective of your business model. Retail, lead generation, content, and support SEM is invaluable. SEM can positively influence your success across all of these e-business types, touching virtually all stages of the customer lifecycle - from awareness, interest, consideration, and ultimately through to purchase.

SEM works because searchers effectively "pre-qualify" themselves when they enter keywords of interest into Google, Yahoo!, or other popular search engines. Of course, the key here is interest: with every search, the consumer is telling you what they want. Now it’s your turn to deliver a targeted ad that compels the consumer to click. By displaying a relevant ad with persuasive copy, you effectively match consumers with the products and services they want to purchase.

Challenge of SEM

Though it sounds easy, marketing on Internet Search Engines is not easy. The search landscape is incredibly dynamic and marketing managers are faced with a myriad of business and technical challenges:

  1. How to profit from paid and natural search traffic?
  2. How to measure visitor behavior beyond the click?
  3. How to plug leaks in the conversion funnel?
  4. How to adjust for multisession activity, latent response, and keyword stacking?
  5. How to identify possible click fraud? (In case of pay-per-click schemes)

In short, SEM can be incredibly lucrative, but it is not easy. And to maximize success, you must constantly manage SEM to your bottom line.

  • So how do you address these challenges?
  • How do you know if your SEM campaigns are working and when they are not?
  • How do you seamlessly connect clicks with conversions and ROI?

I will answer these questions in the following sections and discuss how to perform effective keyword analysis and optimization using a Web analytics tool to help you get the most out of your SEM buck.

Distinguish between Paid & Natural Search

Let’s first talk about paid and natural search. Google is one of the more popular search
engines today, so we’ll use it as an example.


When you enter a keyword or phrase—for example, "ASIC"—Google displays two sets of results. The "natural" or "organic" results come from Google’s massive index of Web pages located all over the Web. At last count, this totaled over two million pages. These pages are indexed based on google’s unique algorithm.(Explained in my earlier blogs) The pages displayed range from Sea food, Australian Securities & Investments, American Society of Irrigation consultants, and Semiconductors.

Natural search results can span tens or even hundreds of result pages, and the sort order is determined by the search engine’s proprietary algorithms. These proprietary algorithms take into account many factors, such as whether the keyword appears in the Web site URL, how often the keyword appears in the site, how many other sites link to it, the quality of those "off-page" links, and so on. A quick search on the Web will reveal at least 100 different factors that allegedly influence a page’s ranking in natural search.

As a marketer selling Application Specific Integrated Circuits (ASIC) - I am dismayed by the fact that our company is not even in the first page of the search result. This is the single biggest disadvantage of the Natural Search.If you’ve optimized your page favorably, it has a good chance of appearing somewhere towards the top natural results. If this occurs, you’ve just received a very low-cost method of advertising and the visibility gained can be tremendously powerful. Multiple studies have highlighted the power of being listed on the first page of search engine results—either in the top ten or even in the top three.

For instance, last year iProspect—a leading SEM agency—published research that highlights 23 percent of searchers try another search after reviewing only the first few results. Another 19 percent try again after the first page, another 26 percent after the second page, and another 15 percent after the third page of results. Given the average results page contains ten entries that would suggest, unless you are in the top thirty natural search results, you are missing a whopping 83 percent of all searchers—you can’t afford to miss out on this visibility.

Fortunately there are multiple agencies offer search engine optimization (SEO) services, which promise to improve your page ranking in natural search listings. Most of these efforts involve multiple months of careful planning, changes, and measurements—which are often quite costly.
The alternate way is to have paid search results - or advertise in Google. Paid search results poses the challenge of how to distinguish the incoming traffic between paid & natural search?
Notice that there is no distinction between paid and natural search. This occurs because the referring URL from a search engine to your Web site is formatted exactly the same, regardless of whether the visitor clicks on a paid or natural listing.

Without having a mechanism to distinguish web paid search page hits from natural search, it is difficult to measure the ROI of marketing dollars. A solution is to use a web analytics tool which modifies the URL on the search results - it adds a unique tagID to each click on the paid search. A web analysis tool can measure the number of the unique tagIDs coming to the site and log in the results. For Example the URL in the paid search can be: http://www.open-silicon.com/paid?cid=10002987 In addition you can collect the key words the user used in his search and log them for future analysis. Web analytics tools such as: Ominiture, Intellitracker, Clicktracks etc can be used to track the effectiveness of the paid search.

The unique tagID code is tied to particular campaign, you also know that it is a Google campaign that ran in November.

This strategy for identifying traffic from paid and natural search channels is critical to maximizing SEM success. It is important that you reliably understand what traffic is driven by each channel, and the profit resulting from that traffic. If you work with an agency, this insight can be used as a baseline to model the ROI from your SEO activities. If you manage your SEO efforts in-house, you can leverage this to better understand how many resources can be profitably allocated towards continual SEO efforts. Equally important, you can maximize your profit yield on matching paid and natural search keywords by reducing those paid campaigns that effectively cannibalize your already robust natural search positioning.

Measuring the Paid Click

When using a paid search, it’s critical to buy more than clicks. You need to buy conversion and ultimately profit—whether it’s direct via online sales or indirect via offline means. Every keyword has a break-even point: bidding any higher will drive you into the red. In this sense, to succeed with paid search, you must have an intimate understanding of your break-even point. Yes, it is important to have the right keywords, effective ad copy, and a persuasive and optimized Web site experience, but none of this matters if you do not know how much you should pay for a keyword.

This may sound obvious to many of you, but in June 2005, JupiterResearch reported that a full 75 percent of search executives did NOT bid for clicks based on revenue. Even worse, only 5 percent bid on keywords based on the profit those keywords were generating. While those are frightening numbers, it really underscores the magnitude of the opportunity ahead of us. For those that leverage Web analytics tools to dive deeper and maximize their SEM success, there is a wealth of low-hanging fruit!

Build a conversion funnel

Measuring beyond the click isn’t just about conversion and profit. With average campaign conversion rates anywhere from 2–10 percent, the vast majority of your visitors are simply not converting to customers. Somewhere in the sales process they bail out. It could be as early as the landing page, or as late as the order confirmation page. But if you’re only measuring click-through rates, you have zero ability to identify and plug these leaks in the conversion funnel. This represents a huge untapped opportunity.

Web analytics tools offers the perfect solution to this challenge. Even with the most basic Web analytics tag, you get comprehensive click-stream data that will show the click path of each and every user. Unfortunately, most Web analytics providers will sell you just that—the click stream of a user. Think about this for a second: how are you going to analyze the overall conversion funnel with click-stream data? User paths vary dramatically (even across just a few pages) and if your Web site is like most, your clickstream report will likely show thousands of click streams, each of which is only slightly different than the other.

That’s not to say that click-stream data is worthless—it can be quite valuable for diagnosing very specific, tactical issues like form abandonment, pop-ups, and on-page errors. Rather, search marketers (along with most analytics users) will benefit from a higher level of path analysis called fall-out or conversion funnel reporting. Fall-out reporting allows you to select major checkpoints (or nodes) in a process and analyze how many users progress through each checkpoint. With fall-out reporting, you can quickly identify major leaks in your conversion funnel.

Identifying Click Fraud

Click fraud is emerging as a key concern for many search marketers. Despite numerous industry efforts, it is still unclear how large or extensive this issue may be. Even the definition of click fraud has yet to be standardized. But generally speaking, click fraud occurs when visitors click on your advertising and have no real intention of purchasing. That may be a gross oversimplification, but fundamentally that probably covers about 80 percent of click fraud. And regardless of how you define click fraud, the results are effectively the same—you spend money on clicks or advertising that has zero chance of becoming revenue.

Unfortunately, detecting click fraud isn’t much easier than defining it. But with Web analytics tools, there are some ways you can retake control of click fraud. These tools provides automated alerts that can be configured to look for certain conditions.

For example, you can configure it to check every week for conversion rates that fall below your normal average. You can set it alert you if your click-through rate changes by more than 25 percent each day and you can configure as many alerts as you like.

Web analytics too should provide daily reports on suspicious trends in your SEM activities so that you can take immediate action. It also provides a valuable proxy relative to click-fraud reporting that you may otherwise receive from search engines themselves.Assuming your Web analytics package supports them, here are some suggestions for alerts you may want to set up:

  • Impressions on keywords (possible impression fraud)
  • Impressions per visitor (possible impression and click fraud)
  • Click-through rates for keywords (possible impression fraud and click fraud)
  • Click-through rates for ad groups (possible click fraud)
  • Cost-per-click on keywords and ad groups (possible click fraud)
  • Clicks-per-visitor (possible click fraud)
  • Average Position (possible click or impression fraud)
  • Page views-per-visitors (possible click fraud)

Closing thoughts

As the popularity and complexity of SEM grows, staying ahead of the competition will become even more challenging. If you have a list of ten to twenty keywords to manage, it was fairly easy to analyze the data by hand or with excel or by using the tools provided by the major search engine vendors. But if you’re like most of your search marketing peers, you could have as many as 100,000 keywords or more that must be managed daily. At the same time, bidding costs continue to rise as you face stiffer competition for ad position within a finite space. And with MSN and Ask Jeeves introducing pay-per-click ad networks to the market, you now have to manage those in addition to Google, Yahoo, and any of the other networks you’re using.

Search engine vendors are also competing against each other by adding new SEM features and options. For example, you’ll soon be seeing new levers—such as bid control by gender and age and ad targeting by gender, age, lifestyle category, and income. As these and other new features create new metrics for success, you’ll need sophisticated analysis capabilities to ensure that your SEM campaigns are achieving optimum numbers. Managing this level of complexity is no longer possible by hand. You need powerful automated management tools available to effectively manage, analyze, and optimize your SEM efforts.

3 comments:

Deepa said...

whoa! didnt quite follow half of what you have written!
you have such a talent for writing. why dont you start a general sort of blog. its a good outlet for your thoughts.

Munaz Anjum said...

As student of Xavier Institute of Management, Bhubaneswar, I think many top B-schools have not yet revised their syllabus to incorporate Internet market. The paradigm of offline traditional marketing is taking a shift to give a space for online marketing. The way Amazon, Ebay, Nextag, etc. have built up their successful virtual empire is worth to notice. They have succeeded in tapping niche market and have gone inversely with 80/20 or Pareto principles. As Chris Anderson in his book has rightly quipped ‘hits don’t matter much in this digital age so long as you are able to sell more of unpopular products at time when cost of distribution and inventory reaches near zero’. Really, the Long Tail demand curve implicitly reflects the abundance of opportunity to tap that exists in niche market. I agree with him that online economics is a study of abundance. However many few Business Schools have truly recognized the importance of online marketing with almost no updates on their syllabus.

The wave of internet marketing is washing the traditional strategies of offline marketing to redefine the new ways to do marketing because consumers are online today than offline.

What do you think?

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